REPORTER’S NOTEBOOKKorea's crypto exchanges need room to become financial platforms

In January 2018, Upbit recorded $7.57 billion in daily trading volume, making it the world's largest cryptocurrency exchange by volume. Binance ranked second, while Bithumb, another Korean exchange, came in third.

Eight years later, the landscape looks very different. On Thursday, Binance recorded more than $10 billion in trading volume, compared with about $1 billion for Upbit and $436.2 million for Bithumb, according to CoinGecko.

The crypto downturn has weighed on exchanges globally. But major overseas platforms have diversified into derivatives, staking and other businesses, giving them more ways to weather a prolonged industry slump.

By contrast, Korean exchanges remain largely confined to spot trading under the current regulatory framework, leaving them more exposed when trading volumes fall. In response, five crypto exchanges are offering zero trading fees, intensifying a price war for market share.

The imbalance is becoming harder to ignore as the global digital asset market broadens beyond spot trading. Institutional capital is entering through Bitcoin and Ethereum spot exchange-traded funds, derivatives and tokenized real-world assets, while stablecoins are gaining traction in payments and remittances.

Korea has shown that it can compete globally in crypto. Yet the regulatory framework has failed to keep pace with the market's evolution, leaving domestic companies with limited room to expand into new businesses.

The proposed Digital Asset Basic Act, which is intended to provide a comprehensive regulatory framework for the sector, had been expected to pass by the end of last year. Lawmakers and regulators, however, remain divided over issues including eligibility requirements for stablecoin issuers and a proposed 20 percent ownership cap on major shareholders of cryptocurrency exchanges.

Under Korea's positive-list regulatory approach, exchanges have limited scope to launch new services until regulators explicitly define what is permitted. In a fast-moving market, that can put domestic players at a structural disadvantage.

Korean exchanges already possess much of the infrastructure required for a broader digital asset market, including trading and custody systems, large user bases and platforms capable of handling significant transaction volumes. Working with traditional financial institutions, they could potentially expand into areas such as asset management and other digital-asset services.

The financial sector is already positioning itself for that shift. Banks, securities firms and other financial companies are moving to acquire stakes in crypto exchanges, seeking an early foothold in what they see as a key part of the infrastructure of future finance. This year alone, financial institutions have committed more than 2 trillion won to acquire stakes in domestic crypto exchanges.

For Korea's crypto industry, the missing piece is no longer market demand, but regulatory clarity.